The big coup in this month’s Management Today (MT) is an interview with the exiting Chairman of Lloyds Banking Group, Sir Victor Blank, who will be replaced by former Citibank Chairman, Sir Win Bischoff at the end of the year.
The editorial of MT starts by saying: “nobody, least of all Sir Victor Blank, wants to bring their career to an end labelled as a value-destroying loser with poor judgement whose final foray was a colossal balls-up … Lloyds/HBOS’s problem is that when the mist clears and money starts being lent again, the new outfit will look like the whale in the pantry and this has not gone unnoticed in Brussels.”
But Sir Victor is unrepentant.
“What we did back in September last year was absolutely unquestionably the right thing to do, and it was, despite everything that has been said, properly reviewed.” (Note the use of ‘we’ as in Eric Daniels and Victor Blank, not Victor on his own.)
“It was properly diligenced, it was properly put together. I said to someone the other day it was done by the book, and I should bloody well know, because I wrote the book. You know, Weinberg and Blank on Takeovers and Mergers.
“It was so right, because we had spent a long time reviewing strategically the future of this group, which was prudently and conservatively managed, and seen by some people as a bit dull. But dull is not a bad thing. However, opportunities to grow abroad were limited – it’s very difficult to buy something at a high price overseas and then make money out of it. And we were restricted in what we could do in the UK because of the competition rules. We had, in my time, three strategy away-days which looked at what we most wanted to do – and that was to buy HBOS.”
Adding HBOS had first come up in 2000 when “the two chief executives exchanged letters – should we merge?”
Blank arrived later and revived the idea “because I knew Andy Hornby [the HBOS CEO]. But we all agreed the competitive environment wouldn’t allow it to happen. Then, in the turmoil of the summer of 2008, it seemed clear that something had to happen with HBOS, that this presented us with an opening.”
HBOS was in deep trouble.
“It’s share price was flagging, the markets were in turmoil and the interbank lending market was closing. So Eric Daniels picked up the phone to Andy Hornby and started the conversation. My role in it, as chairman of the board, was to make sure we did everything in the right way, and I also used an opportunity to talk with the Prime Minister, to raise with him how consolidation of the banks would benefit the Government.”
After the deal was done however, the economy fell off a cliff and HBOS “suffered terrible losses above what we were expecting. The share price fell – everybody’s share price fell. There was a lot of looking at the deal and questions being asked like: ‘Do these guys know what they are doing?’ … but you don’t judge a massive strategic move six weeks after the deal has been completed. You have got to give the merger time. But people didn’t want to give it time and there was a lot of focus on the personalities, on me and Eric, and that was clearly going to go on. It took the focus away from what we needed to do. I was up for re-election at the AGM and I probably would have got re-elected, but decided the right course was to say that I would ensure there was an orderly process of succession.”
You’ll have to buy MT to read the rest, but it’s fascinating stuff including discussions about how to rebuild trust in banking and where the root causes lie. In particular a little pop at Lord Turner of the FSA:
“We’ve also got to make sure we don’t have headlines saying banks are ‘socially useless’, because they ain’t. We provide bank accounts to people who would not otherwise have one. We give to charity. WE provide a very important social function … you have to find where the problem lies. My view is that it’s probably very concentrated in the investment banking area and we should examine what went on there.”
It’s quite a difference to his interview of a year ago.